What Are The Customer Perceptions Towards Banking Industry Marketing Essay
Researches on customer satisfaction from previous studies had been identified. Mengi (2009) find out that responsiveness and assurance are important factors for customer satisfaction. Kumar et al. (2010) and Lai (2004) pointed out that assurance, empathy and tangibles are the important factors while Baumann et al. (2007) found out that tangibles are not related to customer satisfaction. Ahmed et al. (2010) find out that empathy is negatively related to customer satisfaction.
However, some of the customers might not satisfy the quality of service provided by the bank service provider. This is an issue that has concern by the bank which is emphasized on service quality. Dissatisfaction of customers has been identified through the questionnaires. These dissatisfactions are based on the five key dimensions of service quality which includes tangibles, reliability, responsiveness, assurance and empathy.
In addition to that, journals and data sources are limited because this research is focus on Malaysia. There is minority of researchers done the research in the Malaysia banking industry. It is tough to search more journals to support the customer satisfaction in Malaysia's banking industry because different cultures, behavior and others. The aim of this study is to measure the influences of service quality on customer satisfaction in banking industry. If the researchers able to find out, the service quality can be improve easily.
This research is to identify five significant dimensions of service quality to measure customer satisfaction in the banking industry. These dimensions are taken out from service quality (SERVQUAL) model. In other words, this paper is to measure customer satisfaction based on SERVQUAL model. The five key dimensions of service quality are tangibles, reliability, responsiveness, assurance and empathy.
This study is based on the satisfaction of private university students that conduct banking services nowadays. Their perspectives are very important to the banking industry so that the bank service provider can improve their services to satisfy the customers. Service quality is a main topic as well as in the future because service industry are growing faster now. Service quality of a bank can determine the level of satisfaction among the customers as well as the customer loyalty. By applying these five significant dimensions, the bank can easily determine the key dimensions to maximize their customer satisfaction.
Nowadays, there is a stiff competition in the banking industry. In order to become a leader in the industry, there is a need for bank to increase customer satisfaction. Customers have many choices if a bank unable to provide a better quality services to them. Therefore, the bank needs to find out more strategies to increase customer satisfaction and maintain customer loyalty.
In the scope of the study, impact of service quality on customer satisfaction will be discussed and investigated and it is based on the studies exclusively on bank. Respondents of this research are the private university students who are conduct their banking services with the bank. The main reason behind this study is to find out exactly how to meet customer needs as well as adopt some strategies to meet those needs. Therefore, this research will be focus on those who are conduct banking services with the bank.
For the purpose of this research, this study will be focus particularly in the areas of service quality offered by the bank. In addition to that, we can have more details of how the service quality can be provided by the bank will influence customer satisfaction throughout this research. This study can help the bank to know what quality of services that customers are expected. The bank service provider will be able to increase the service quality to improve customer satisfaction and also maintain customer loyalty.
Besides that, the definition of service quality is a result of the comparison between expectation and perception of the service performed by customer (Lehtinen & Lehtinen, 1982; Lewis & Booms, 1983, Gronroos, 1984; Parasuraman et al., 1985, 1988; Caruana, 2002). It also can be defined as the differences between expectation of service and their perception of the service performed (Parasuraman et al., 1985). Service quality is defined further as the overall evaluations of a service company that results from compare performance of a company with the customer's expectations of how company in the industry should perform (Parasuraman et al., 1988).
According to Gronroos (2000), the definition of service is a process consist of a series of more or less intangibles activities that are normal but not necessarily always and take place where there is a interaction between customer and service employees and/or physical resources or goods and/or systems of the service provider which are to solve the problems of customer.
Service quality is a global judgment or attitude related to inferiority or superiority of the services by customer (Fogli, 2006). It is a cognitive judgment. Mudie and Pirrie (2006) identified the features of services. They are intangibility, inseparability, variability and perishability.
Firstly, intangibility is a main feature of services. Services could not assure the quality because it cannot be counted, tested, measured, verified and inventoried in advance of scale. It is difficult for companies to understand how customers consider their services and evaluate the service quality.
Secondly, the difference between physical goods and services in terms of the sequence of production and consumption is called inseparability. Physical goods means goods are produced first, then stored and finally sold and consumed. Services are sold first, then produced and consumed at the same time.
Thirdly, variability is an unavoidable consequence produced and consumed at the same time is variability in performance of a service. Service quality may various depends on who provide it as well as when and how it is provided.
Lastly, perishability refers to as services are performances they could not be stored for later use or sales.
2.3 Customer Satisfaction
According to Kandampully (2000), services are an important intangible experience and customers may not easy to evaluate the products prior to experience. Customers may have negative evaluations when a company failed to pay attention to influence attributes in choice intention and it can lead to unfavorable word-of- mouth advertising (Chon et al., 1995).
Perceived service quality is a global judgment or attitude that related to the superior or inferior of the services while satisfaction is related to a transaction that is specific (Parasuraman et al., 1988). In the other words, customer satisfaction has been often suggested to be the prequisite of customer loyalty (Lam & Burton, 2006). According to Ehigie (2006), there is a significant positive relationship between customer satisfaction and customer loyalty or customer retention.
Parasuraman et al. (1994) believed that satisfaction is influenced by service quality, price and product quality. The research based on a transaction level. At the same time, Yi (1991) stated that customer satisfaction operates in two ways which are transaction-specific and general overall. The transaction-specific refers to the assessment by customers after a purchase. Overall satisfaction concept is the customer's rating of a brand based on experience (Johnson and Fornell, 1991).
The measurement of customer satisfaction can be single item and multiple item scale. According to Cronin et al. (1992), they used one-item scale to measure customer satisfaction. It is means that the overall feeling of a company by customers. On the other hand, other research used multiple item scale to measure customer satisfaction. For the example, Patterson et al. (2003) used four-item scale while Shemwell, Yavas, and Bilgin (1998) used five-item scale to measure customer satisfaction.
According to Oliver (1980), customer satisfaction means that when the customers compare their perceptions of actual performance on the products and services with the expectations, then the feelings of satisfaction have appeared. The differences between the expectations and the actual performance will make disconfirmation. There are three types of disconfirmation which includes positive disconfirmation, negative disconfirmation and zero disconfirmation.
Firstly, positive disconfirmation is the actual performance on the products and services exceeds the expectations of customers. Then, the customers are highly satisfied. Secondly, negative disconfirmation occurs when the actual performance on the products and services less than the expectations of customers. Then, the customers are highly dissatisfied. Lastly, the actual performance on the products and services equal the expectations of customers can be defined as zero disconfirmation.
On the other hand, Giese and Cote (2000) identified the components of satisfaction. Satisfaction is a kind of response either cognitive or emotional by customers. Thus, the response is emphases on a particular focus such as product, experience, expectations and others. It also can appear at a particular time which includes after choice, previous experience and others.
Besides that, Anderson and Srinivasan (2003) have been identified five dimensions of customer satisfaction which are overall satisfaction, customer favorite, customer loyalty, customer recommendation and priority option. Understanding of customer satisfaction will boost companies to maintain customer satisfaction of products and services. Products and services that are inferior can be improved to allow customers with fantastic impression.
The most widely used method to measure service quality is the SERVQUAL model (Hemmasi, Strong and Taylor, 1994). The developer of this model is Parasuraman et al. 1985 (Kay C. Tan and Theresia A. Pawitra, 2001). Parasuraman et al. (1985) identified ten dimensions of service quality. They are tangibles, reliability, responsiveness, communication, competence, courtesy, credibility, security, understanding or knowing the customers, and access. Parasuraman et al. arranged a quantitative research in 1988. They revealed an instrument to measure customers' perception of service quality. It is became known as SERVQUAL.
The dimensions of service quality were changed to five dimensions which include tangibles, reliability, responsiveness, assurance and empathy by using factor analysis. Service quality is a function of the difference gaps between expectation and perception. SERVQUAL instrument has been proven that valid and reliable across a wide range of service context.
These five dimensions of service quality were considered as the framework of SERVQUAL (Bahia & Nantel, 2000). Although SERVQUAL model only have five dimensions, but it still covers the ten dimensions as mentioned before (Parasuraman, et al., 1988; Zeithaml et al., 1990).
Organizations can use the SERVQUAL model in different way. According to Parasuraman et al. (1988), this model can help the service and retailing organizations to assess the perceptions of service quality and expectations of customers. It can focus on the core areas where managers need to pay more attention and action to improve service quality.
In addition to that, this model is often applied in international background (Newman, 2001; Kassim & Bojei, 2002; Sureshchandar et al., 2002; Zhou, 2004). In conclusion, this model can be applied in the banking industry (Cronin and Taylor, 1992). This research is focus on the performance of the banks so that the adoption of SERVQUAL model can be accepted. Below table are shown the several benefits of SERVQUAL model.
Table 2.4: Benefits of SERVQUAL Model
The Benefits of SERVQUAL Model
It is good at eliciting the views of customers regarding service encounters, e.g. customer relative importance, expectations, and satisfaction.
It is able to alert management to consider the perception of both management and customers.
Addressing the service gaps can serve as a basis for formulating strategies and tactics in order to ensure the fulfillment of expectations.
SERVQUAL is able to identify specific areas of excellence and weakness.
It is able to prioritize areas of service weakness.
It provides benchmarking analysis for organizations in the same industry.
SERVQUAL can trace the trend of customer relative importance expectation, and perception, if applied periodically.
Sources: Kay C. Tan and Theresia A. Pawitra, 2001
2.5 Variable Descriptions
They are five dimensions of service quality under SERVQUAL model which are tangibles, reliability, responsiveness, assurance and empathy (Parasuraman et al. 1988). Most of the research used SERVQUAL in their research.This model is to measure customer satisfaction and perceived service quality. Therefore, it is important for company especially in banking industry to success in the market.
Parasuraman et al. (1988) defined tangibles as the things that are physically observed by customer in the bank. It is includes personnel, physical facilities, materials and appearance. It may also represent able and skilled personnel, the quality of products and services, brochures and cards. For example: the information of bank statement is complete.
Yavas et al. (1997) proved that the tangibles element measure bank's facilities and equipment, bank employees' physical appearance. The customer can assess the premises of the bank or the appearance of employee. This dimension is notice by customers before entering a bank. It can help customers to form good initial impressions.
Based on their research, tangible element was an important factor to fulfill Turkish customer's satisfaction. Banker should provide comfortable banking environment for customers. The bank should always enhance and upgrade the bank surrounding condition which includes temperature, lighting and spatial layout of furnishings. The study showed that customer disliked the smoke-filled bank office and high temperature in the branch. In order to solve this issue, the bank must implement no-smoking policy and installation of air-conditioners.
Bank management should provide training to the staff although it is costly and may not result in short-term profitability but lack of training may lead to problem in long-term and loss of customers. They also need to hire staff with social skill to build a long-standing relationship between bank and customer (Guo, Duff and Hair, 2008). Better service quality can be considered as an important perquisite to establish and have a significant relationship with customers (Lassar, Manolis & Winsor, 2000).
Besides that, in the research of Newman (2001), the dimension of service quality which is tangibles of Bank 1 was exceeded its customer expectations. The bank was able exceeded customer expectations because refurbishments programme and upgrade equipment in the branch. The banking environment of branches was clean and tidy for customers. However, there was some weakness tangibles component of SERVQUAL which included customer leaflets, letters, statements and communications in general. The company response consists of the adoption of "plain English" policy for all correspondence and house style of a famous retailer for its product literature. Thus, the perception of customers was improved. In addition to that, formed the central part of the organization through investment in information technology and process and system re-design was improved quality. Adoption of tactical strategies on human resources was implemented such as encouraging staff to conduct themselves by using customer names more frequently, greeting to customer, saying "please" and "thank you" and undivided attention for customer.
Parasuraman et al. (1988) defined reliability as the ability to perform the service as promised dependably, consistently and accurately. For example: keeping promise and keeps record accurately. In other words, reliability can be defined as "doing what is promised" and "doing it at the promised time" (Van Iwaarden et al., 2003). The items of reliability was included refers to personnel training, interruption of service, absence of errors and punctuality (Petridou et al., 2007).
According to Van Iwaarden et al. (2003), reliability and tangibles are included in the top ten dimensions of service quality. In the theory of reliability, it has provided some important findings that how to manage system structure which affects its ability to provide reliable customer service and how to incorporate service recovery (Simons JR, 2004).Besides that, reliability has always been cited as an important dimension to assess service quality. It is a basic requirement for a company to compete in the global market (Cook et al., 2002).
In the research of Munhurrun, Naidoo and Bhiwajee (2009), provide accurate and reliable information as promised and prompt service to customers can influence them to recommend to others or stay with it. Thus, this is an important finding for service marketers since it demonstrated that employees indulge in negative word-of-mouth advertising if there is a shortage in their perceptions of the reliability-responsiveness gap.
On the other hand, the dimensions of reliability, responsiveness-empathy, and tangibles were explanatory element to predict customer satisfaction in Greek Cypriot. The scale of reliability had the highest influence on customer satisfaction. It is means that when the bank delivery service as promised without error and at time for customers, the customer will be satisfied and recommend to others (Arasli et al. 2005).
At the same time, Kumar et al. (2009) stated that the smallest service quality gap is reliability. The respondents in the research perceive the ability of bank to deliver service as promise dependably and accurately and this close to their expectations. Moreover, this can help banker to develop strategies and fast response to changes of banking environment.
Parasuraman et al. (1998) defined responsiveness as the willingness of employee and staff to provide prompt service to meet customer's needs and wants. Responsiveness also can be defined as the willingness and readiness of employee to provide prompt service for customers such as timeliness of service (Lassar, Manolis and Winsor, 2000).
On the other hand, the key components of responsiveness are employee willing to help customers and provide prompt service (Yavas, Bilgin and Sahmwell, 1997). In the research of Yavas et al. (1997), the dimensions of service quality which is responsiveness is closely linked with customer satisfaction and their continued patronage decision. Most of the banks are pay attention on customer-relation in the training programme such as listening skill of their staff. In order to enable customers to conduct banking services, the bank also expand ATM network and standardize the process.
Additionally, responsiveness consist some activities which includes the willingness of employee to tell customers what exactly had been done without error, delivery of prompt service, full attention as well as respond to customers request. Organizations should improve the attitude of their staff to success in the market (Newman, 2001).
Assurance is defined as the employees' knowledge, courtesy and the ability of employees to inspire trust and confidence to the customers (Parasuraman et al. 1988). Additionally, it requires the employee must have knowledge to answer the customer's question and ability to provide competent, confidential, courteous and friendly service (Newman, 2001).
Empathy is defined as the caring, personalized attention that a company given to customers and quality or performance by the worker when the indicated "customers' best interest at heart". For example: convenient business hours and concerned on individual customer needs (Parasuraman et al. 1998).
In the research of Yavas et al. (1997),
This chapter consists of five parts, which are research framework, hypotheses development, research design, data collection and data analysis methods.
3.1 Research Framework
Figure 3.1: Research framework of the influences of service quality on customer
satisfaction in the banking industry
Independent variables Dependent variable
Source: Developed for this research
A research framework is expressed as how one makes logical sense of the relationship among several factors that have been identified as important to the problem. Figure 3.1 above illustrates the independent variables and dependent variable that are related to the research. The dependent variable is customer satisfaction while the independent variables are tangibles, reliability, responsiveness, assurance and empathy that are contribute to customer satisfaction.
These five independent variables are the dimensions of service quality. All of the components of service quality will have an impact on customer perception of the service offered by the bank. Therefore, the five dimensions of service quality play a role in influencing customer satisfaction. As a result, any dimension of service quality may have a positive or negative effect on customer satisfaction.
3.2 Hypotheses Development
To test the relationship between independent variables and dependent variable, the following hypotheses have been formulated.
H1: There is a significant relationship between tangibles and customer satisfaction.
H2: There is a significant relationship between reliability and customer satisfaction.
H3: There is a significant relationship between responsiveness and customer satisfaction.
H4: There is a significant relationship between assurance and customer satisfaction.
H5: There is a significant relationship between empathy and customer satisfaction.
3.3 Research Design
The main purpose of this research was to investigate the influences of service quality on customer satisfaction in the banking industry. This study tried to ascertain the relationship between SERVQUAL and customer satisfaction. It was also to identify the relationship between independent variables and dependent variable.
There were three types of methods that might be used in this research which are structural interview, structural focus group and questionnaire. However, the third method was chosen and distribution of questionnaires to respondents. The target respondents of this questionnaire were private university students of Multimedia University in Malacca. It was easier to reach the respondents and assist them if they have any doubt regard to the questionnaire.
3.3.1 Target Population
The population in this study involved private university students of Multimedia University in Malacca which were conduct banking services with the bank. They were male and female between the age ranges from 16 to 28 above. Education levels of the respondents were diploma, degree, master and other.
3.3.2 Sampling Method
The sampling technique used in this research was convenient sampling method to adopt the research. The convenient sampling was the type of non probability sampling. It was means that sample size determined in advance. Convenient sampling method was the sampling that using the questionnaire to collect the data. This method was cheap and save time. This sampling was to collect the data from the public that are convenient to them for provide the information. This method was preferable because it is more easy compare with other techniques.
3.3.3 Sample Size
In this research, 150 questionnaires were distributed by hand to students in a private university in Malacca. They were basically having different perceptions of service quality when conduct their banking services with the bank. The degree of precision is higher and the results are able to show a better significant by having the feedback from 150 respondents. As a result, it will more convenient and less time consuming.
3.3.4 Research Instrument
The questionnaire had been developed to this research to collect the data that how the customers feel most satisfied when conduct their banking services. The questionnaire had divided into three parts which are Section A, Section B and Section C.
The Section A dealt on the demographic background of respondents such as gender, age, nationality, education level and others. This part is developing to gather the respondents basic and background information. Type of measurement scale used was nominal scale.
On the other hand, Section B of the questionnaire had been developed based on the objectives of this research. Therefore, question in this section were based on the five dimensions of service quality which are tangibles, reliability, responsiveness, assurance and empathy that are contribute to customer satisfaction. Type of measurement scale used was interval scale.
Lastly, Section C was designed to collect data of dependent variable which are perceived quality of students and their satisfaction on service quality (SERVQUAL) in the banking industry. Type of measurement scale used was interval scale.
These questions were measure on the five-point Likert scale rating which range from strongly disagree (1) to strongly agree (5). The respondents may choose the best scale from the experience that they have before. It was easy to know by researchers the problem of the customer satisfaction by the services provided.
3.4 Data Collection
Data collection method is an important appearance to any type of research study. If the data collection is not accurate and inexact, invalid result may occur. Quantitative data collection method is specializing in producing results which are easy to summarize and compare. Paper-pencil questionnaire is one of the categories under quantitative data collection method.
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